Category Archives: Foreclosure

3 Common Summary Judgment Mistakes Made By Lenders in Florida Foreclosures

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Imagine you are a defendant in a mortgage foreclosure lawsuit in Florida. You borrowed money, signed a promissory note and a mortgage, and defaulted on the loan. You have been sued by the lender (or an assignee of the lender), who is the plaintiff in the lawsuit. You have filed an answer and affirmative defenses. The plaintiff now moves for summary judgment, claiming there are no genuine issues of material fact and they are entitled to judgment, without a trial, as a matter of law. How do you respond to this?

In defending against summary judgment motions in foreclosure cases, I have seen many mistakes made by plaintiff’s counsel. This article describes the three most common mistakes I have seen. Sometimes all three mistakes are made in the same summary judgment motion, and sometimes only one of them. Any one of these mistakes can be fatal to the success of a summary judgment motion. These mistakes are especially prevalent in cases filed by foreclosure mill law firms seeking to foreclose on residential property. But I have seen the same mistakes made in commercial foreclosures where the lenders are represented by prestigious law firms.

Mistake #1: Authenticated Promissory Note Missing from Summary Judgment Evidence

In a mortgage foreclosure action, introduction into evidence of the original promissory note is central to the ability of the plaintiff to maintain the action and prove a defendant’s liability. See, e.g., State Street Bank and Trust Co. v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). To establish liability on a motion for summary judgment, the promissory note is one of the most important items of summary judgment evidence that must be served. The Florida court rules require that all summary judgment evidence on which the movant relies must be served at least 20 days before the time fixed for the hearing.

Surprising as it may seem, plaintiffs sometimes fail, in their summary judgment evidence, to include the promissory note. This failure makes the summary judgment motion dead on arrival.

Even if the plaintiff includes the promissory note in their summary judgment evidence, they sometimes fail to include evidence as to the authenticity of the promissory note. § 673.4011, Florida Statutes, provides that a person is not liable on an instrument unless the person signed the instrument. (A promissory note is a type of instrument.) In order to establish the borrower’s liability on a promissory note, the summary judgment evidence must include evidence that the borrower actually signed the note.

Unless the borrower has admitted they signed the note, this is a fact that must be proved by the lender in order to obtain a summary judgment. In many cases where the borrower has not admitted they signed the note, I have been surprised by the plaintiff’s failure to include this crucial evidence. The failure to include this evidence can destroy a summary judgment motion in a foreclosure case.

Mistake #2: Failure to Include Admissible Evidence of the Amount Owed

The plaintiff’s summary judgment evidence will usually include an affidavit from a representative of the lender in which they state the amount that is owed on the loan based on their review of the lender’s books and records. Sometimes, however, the affidavit and summary judgment evidence fail to include the documentation that was reviewed in order to determine the amount they are claiming is owed.

The problem is that, unless the documents on which the statements as to amount owed are based are also included in the affidavit or otherwise in the summary judgment evidence, the statement in the lender’s affidavit as to the amount owed violates the “best evidence rule,” and is inadmissible hearsay. The “best evidence rule” is embodied in § 90.952, Florida Statutes. When a party is trying to prove the contents of a writing, only the original or duplicate of the writing is admissible. See, e.g., Garcia v. Lopez, 483 So. 2d 470 (Fla. 3d DCA 1986).

The documents the lender’s representative reviewed may be admissible under the business records exception to the hearsay rule, but only if the plaintiff, though its affidavit, establishes the proper predicate for their admission, including their proper authentication. However, it would be the documents themselves that would be made admissible thereby, not the representative’s opinion or summary of what he or she thinks the records show.

The representative’s statements as to the amount owed, standing alone, are merely his or her opinion of what is contained in unverified out-of-court writings, and are offered for the purpose of establishing the truth of the matters asserted, making them hearsay, which is inadmissible in evidence. The documents themselves are hearsay, but could be made admissible under an exception to the hearsay rule. Without the documents being in evidence, the representative’s statements about what the documents say become hearsay about hearsay, i.e., double hearsay. I have been shocked at how many times I have seen this mistake made by plaintiffs in foreclosure lawsuits.

Mistake #3: Failure to Disprove All Affirmative Defenses

When a plaintiff moves for summary judgment, the plaintiff has the burden of disproving all of the defendant’s affirmative defenses. See Haven Fed. Sav. & Loan Ass’n v. Kirian, 579 So. 2d 730, 733 (Fla. 1991)(“A court cannot grant summary judgment where a defendant asserts legally sufficient affirmative defenses that have not been rebutted”). In other words, in order to have a chance to obtain summary judgment, the plaintiff must either present admissible evidence to disprove the defendant’s affirmative defenses, or show that the defenses are legally insufficient, meaning they are not valid defenses even if the alleged facts supporting them are proven.

Especially in residential foreclosures, the lender moving for summary judgment often completely ignores the defendant’s affirmative defenses. This omission eviscerates the lender’s ability to obtain summary judgment. Even if the lender disproves some but not all of the affirmative defenses, the summary judgment motion must be denied. All affirmative defenses must be addressed and disproved in the summary judgment motion in order for the motion to have a chance of success.

Conclusion

These mistakes are most often made in residential foreclosures. To be effective, objections must be properly and timely raised in opposition to a summary judgment motion. For borrowers who need time to work out a loan modification or short sale, competent legal representation can be a worthwhile expenditure.

© 2013 Stephen Verbit. All rights reserved.

Effect of Failure of Spouse to Join in Mortgage of Homestead Property in Florida

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Can a bank foreclose a mortgage against Florida homestead property owned by a married person when his or her spouse did not join in the mortgage?

Florida Constitution, Article X, Section 4(c) provides in pertinent part: “The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale, or gift….”  Thus, the Constitution requires the owner’s spouse to join in any alienation of the homestead property.

In the case of Pitts v. Pastore, 561 So. 2d 297 (2d DCA 1990), the Court applied this constitutional provision to a mortgage of homestead property that was executed by a man who was the sole owner of the property, but was also married at the time, and the wife did not sign or otherwise join in the mortgage. The Court held that such a mortgage is not void ab initio but is ineffectual as a lien until such time as either the spouse joins in the mortgage or the property loses its homestead status (which it did in that case when the man and woman divorced).

Assuming the borrower/mortgagor was married at the time he or she executed the mortgage and the property was and still qualifies as homestead, then the lien of the mortgage never attached to the property and, as a result, the bank cannot enforce its mortgage against the property and cannot foreclose. Of course, the borrower may still be liable on the note, and may be subject to claims of mortgage fraud if he or she represented to the lender he was not married.

However, there is a Florida Supreme Court case from 1940 called Bigelow v. Dunphe, 197 So. 328 (Fla. 1940) in which the Court held that it is the lender’s burden to determine whether property on which it is taking a mortgage is homestead or not and that the lender may not rely solely on the public records or statements of the borrower. The Court stated: “The fact of actual possession and use as the home of the family was one against which the lender could not shut his eyes. Every person dealing with land must take notice of an actual, open, and exclusive possession; and where this, concurring with interest in the possessor, makes it a homestead, the lender stands charged with notice of that fact, it matters not what declarations to the contrary the borrower may make.'”

In a hypothetical case, the public records may have shown the borrower was married at the time he or she executed the mortgage, which would further weaken the bank’s case, which is already weak if the borrower told bank representatives, before execution of the mortgage, that he or she is in fact married. The lender cannot rightfully say it was the borrower’s duty to disclose his or her marital status or the homestead status of the property. If the borrower made any affirmative misrepresentations, then the bank may have a claim against the borrower for fraud, but the lien of the mortgage would still not attach.

There is a caveat to all this. In Palm Beach Savings & Loan Ass’n v. Fishbein, 619 So. 2d 267 (Fla. 1993), the Florida Supreme Court ruled that a bank that took a mortgage on a marital residence, after the husband forged the wife’s name on the loan documents, was entitled to an equitable lien against the residence, even though it was homestead, to the extent that the bank’s funds were used to satisfy preexisting mortgages and taxes on the property, even though the wife had not been a party to the fraud. The Court’s rationale was basically that the wife had benefited from the prior liens being paid off and she would be unjustly enriched if she could keep the property free and clear of all liens.

Therefore, even though homestead would prevent the lien of the mortgage from taking effect, the bank might be entitled to an equitable lien to the extent the mortgage proceeds were used to pay off prior mortgages, taxes, or other liens.

Florida’s 2013 New Foreclosure Law

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Foreclosure bill becomes law

By Gary Blankenship
Senior Editor – Florida Bar News

A bill to speed up the handling of foreclosure cases in Florida courts has been signed by Gov. Rick Scott.

Scott signed HB 87 on June 7 and it became effective with his signature.

He was heavily lobbied on the measure. 

Critics contended it didn’t provide enough time for defendants with legitimate claims to find lawyers and raise those claims, and in some cases the law would prevent those who are fraudulently foreclosed from getting their homes back. 

Supporters said the legislation was needed for courts to attack more than 350,000 foreclosure cases backlogged in the state courts and also give a way for homeowners’ and condominium associations to force the completion of foreclosures when they are owed unpaid fees and assessments.

The bill:

* Cuts the statute of limitations for banks to seek a deficiency judgment against a foreclosed homeowner from five years to one year. The amount of the deficiency would be limited to the difference between the amount received in the foreclosure sale and the fair market value of the house at the time of the sale, not the amount of the original mortgage.

* Requires higher paperwork standards for lenders filing foreclosures, to include showing that the plaintiff has the right to foreclose.

* Allows show cause hearings in foreclosure cases using the summary judgment standards to speed the resolution of foreclosure cases, and at those hearings defendants will have to claim a specific, allowable defense to forestall the foreclosure.

* Allows homeowners’ and condominium associations with liens on unpaid property assessments to file for a show cause hearing if the lender does not.

* Mandates that “innocent” third parties who buy foreclosed homes cannot be divested of those homes if that foreclosure was later found to be fraudulent. Instead, the original owner will be limited to collecting monetary damages from the lender or party responsible for the fraud.

“It will accomplish its purposes with undefended cases and to the extent the court needed any help to get rid of those — and I’m not sure they did — it should help get those on to judgment as quickly as possible,” said Royal Palm Beach attorney Tom Ice, who defends foreclosures and who lobbied against the bill. “The ones I am concerned about are the ones who have hired counsel and defend [the foreclosure] and expect due process. . . . It means we attorneys defending homeowners are going to have to be quick on our feet and not miss any deadlines.”

He questioned whether lenders will partake of the faster foreclosure procedure, noting that the prior procedures were rarely used. To apply the new law in existing cases, lenders may have to refile much of the paperwork to comply with the tougher standards in the new law. 

Ice also said homeowners’ and condominium associations might have difficulty intervening in cases to speed foreclosures. The law, he noted, requires an accurate statement of the mortgage amounts owed by the borrower for the show cause hearing and he’s not sure how the associations will be able to acquire that information from banks.

Ice predicted legal challenges to the law. One constitutional challenge may be that the law infringes on the Supreme Court procedural rulemaking authority because it spells out how foreclosures will be handled. A second, more serious, challenge, he said, is likely over the provision that limits a homeowner who was wrongly foreclosed to monetary damages instead of reclaiming the home if it was purchased by an innocent third party. 

That provision, Ice said, “is taking away the court’s power to correct itself” when error or fraud is involved in the foreclosure.

“It’s like the bank can turn around and say, ‘Ha, tricked you!’” he said. “Never before in the United States has a law been passed to allow that. It’s like a statute of repose on robbing a bank. If they can last 30 days without anyone discovering it, then ‘we get to keep the money, now.’”

William F. “Fletch” Belcher, chair of the Real Property, Probate and Trust Law Section, said the section strongly supported the bill and had a hand in writing it with House Sponsor Rep. Kathleen Passidomo, R-Naples. Passidomo wrote an article on the impact of the bill for an upcoming issue of the section’s newsletter, Action Line.

Belcher said the bill will address multiple problems: blighted neighborhoods from empty properties locked in foreclosure litigation, cases becoming logjammed in the courts, and the difficulty of junior lien holders, such as homeowners’ and condominium associations, to enforce their liens.

“This bill is truly a mixed bag,” Belcher said. “There are things in there for and against every interest group.”

The most controversial parts, he said, are the sped-up show cause hearing and the protection for innocent third-party buyers of foreclosed properties. But those sections have protections, including that paperwork and service requirements must be scrupulously followed. 

“If the complaint states what it’s supposed to state and it’s properly served, then the court enters the show cause order, which basically gives the owner a short period of time to show that he or she has a defense to the foreclosure,” Belcher said. “It makes the owner make some sort of effort to show there is a defense, that there is an issue to be tried, and there is a defense to the foreclosure. If the defendant can’t do that, then the court is required to go ahead and enter a foreclosure order.”

As for the irrevocability of the final sale, he said, that only comes after there is valid service, a valid foreclosure order, and all appeals have run.

“If the final judgment gets reversed on appeal, then the safe title provision doesn’t kick in,” Belcher said.

While the new law can’t necessarily force banks to file foreclosures on their own to speed pending cases, he said it gives judges more tools. And foreclosures are different from normal civil cases where judges usually let the parties determine the pace of litigation. Because of the volume, Belcher said, judges “are driving the trains. They are setting the hearings and setting the trials, and not the lenders.”

Providing the homeowners’ and condominium associations with liens for unpaid assessments the ability to seek a show cause hearing also will speed the process, he said.

Asked about his reasons for signing the bill, Scott’s office sent a video clip of the governor answering that question to reporters. In the clip, Scott said: “It’s going to help make sure we have a timely foreclosure process so our families can make sure that they can keep their homes and make sure we get back to work. Home prices are up; new home construction is up, just like jobs are back.”